Kudelski Makes Another Offer for OpenTV

The Kudelski Group said Monday that its wholly owned subsidiary, Kudelski Interactive Cayman, Ltd., has commenced a tender offer to acquire all outstanding Class A shares of interactive TV middleware and applications provider, OpenTV, not already owned by Kudelski, for $1.55 per share in cash (note: Kudelski is OpenTV's largest shareholder: it has an approximately 32.3% stake in the company that gives it approximately 77.2% voting control). The bid values OpenTV at approximately $215 million.

This is the second time this year that Kudelski has attempted to take full control of OpenTV: the previous attempt, which offered $1.35 for each OpenTV share (and which valued OpenTV at approximately $127 million), was rejected in June by a special committee of OpenTV's board of directors (which was advised by UBS Securities) as "inadequate and not in the best interests of the Company and its stockholders." The failure of the earlier bid resulted in a war of words between Kudelski, OpenTV and the latter's second-largest shareholder, Discovery Group, in which 1) Kudelski accused OpenTV's current management of unwisely prioritizing short-term profitability over long-term investment (see the article published on itvt.com, June 5th) and derided the special committee of its board of directors as having an "overly optimistic and unrealistic outlook on both OpenTV's future business prospects and the business as a whole"; and 2) Discovery Group (which had been singled out for criticism by Kudelski for having provided OpenTV with an analysis of its offer that was "fundamentally flawed and contain[ed] numerous inaccurate assumptions and misleading analysis") responded that the real goal of Kudelski's buyout bid was "to maintain unfettered access to excessive idle cash at OpenTV, amounting to $114.2 million at March 31, 2009, in order to pursue large-scale acquisitions and capital spending projects for the benefit of Kudelski's global enterprise" (see the article published on itvt.com, June 10th).

According to Kudelski, its new offer, which it says is not conditioned on a minimum number of Class A shares being tendered, represents:

  • a 17% premium over the $1.33 closing price of OpenTV's Class A shares on October 2nd, the last trading day prior to the date on which the offer was commenced.
  • a 17% premium over the average closing price of the Class A shares from June 4th, the day on which Kudelski withdrew its previous offer, through October 2nd.
  • a 55% premium over the closing price of the Class A shares on February 26th, the last trading day prior to the announcement of Kudelski's previous offer.
  • a premium of approximately 42% over the enterprise value implied by the closing price of the Class A shares on October 2nd, and a premium of approximately 190% over the enterprise value implied by the closing price of the shares on February 26th.

According to Kudelski, its new, all-cash offer "provides OpenTV shareholders immediate liquidity at a superior value to OpenTV's future prospects, particularly given OpenTV's current scale and R&D challenges and the significant amount of new investment required for OpenTV to remain competitive as a standalone, publicly traded company." It also claims that, by combining OpenTV with Kudelski, the new offer "is in the best interest of OpenTV's employees, customers and partners because of Kudelski's commitment to the sustainability of the business and Kudelski's ability to invest in R&D and growth to ensure OpenTV has a strong future in the context of an intensely competitive environment."

Kudelski--whose financial advisor for the new offer is Credit Suisse and whose legal counsel for the offer is Cooley Godward Kronish--says the offer is in effect until 5:00PM Eastern on November 6th, unless extended. It says it plans to finance the transaction through a credit facility, as well as through available cash held by itself and its subsidiaries. It adds that "the commencement and consummation of the tender offer does not require the approval or recommendation of the OpenTV board, and Kudelski has not asked the OpenTV board to approve the tender offer."

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